Question

Topic: Other

Determining Wholesale & Retail Prices

Posted by Anonymous on 1/25/2011 at 3:56 PM ET 250 Points
We are marketing products from our small farm. We know the cost of producing our products, and we've included a margin in our determined cost of any given product. Now we are ready to figure out the wholesale and retail prices of our product. Is there a standard equation typically used to determine first the wholesale price, and also the retail price for our product? Basically, is there a standard proportion between wholesale and retail prices, or between manufacturer's cost and wholesale or retail prices?
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  • Posted on 1/25/2011 at 9:32 PM Accepted
    In short, no. Pricing is one of the 4 P's of Marketing for a reason: It's the ultimate expression of what you think your product is worth. It's a MARKETING issue, not a financial calculation.

    If you treat pricing as a way to recover costs and earn a profit, you're probably going to leave a lot on the table, or overcharge by enough to really hurt your image (and your sales). It's unlikely you'll come up with the right price if you approach pricing from the "back end."

    You need to understand the value of what you're delivering to your target audience. What's it worth to them? Who or what is the competition? Why is your product different from, and better than, that of your competition? What's that worth?

    You need to abandon the thinking of pricing strategy as a financial issue and accept that it's a MARKETING issue. If you need help with that, feel free to contact me offline. We do a lot of consulting on pricing strategy issues, and we can share some approaches and tools for setting the right prices for your products.


    P.S. This is a common problem with commodity-like products. In fact, we got into this initially as part of a project in agricultural products, and the results were remarkable. Higher prices, better margins, higher yields, greater customer satisfaction.
  • Posted on 1/26/2011 at 4:41 PM Author
    Great Answer. While I hoped to price our product based on competition, the value to our target audience, and what makes our product special, I was convinced that there was a ballpark figure I should be starting with that I could arrive at with such an equation. In fact, our method at arriving at a ballpark figure is to compare our prices with those of our competitors. This has been a good starting point. Thank you for your response!
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